World Gold Council | Investment Statistics and Commentary Q3 2012 -October 18, 2012-.

Investment Statistics and Commentary

18 October 2012

Quarterly statistics commentary Q3 2012

Overview

This commentary summarises gold’s price performance in various currencies, its volatility statistics and correlation to other assets, and the macroeconomic factors that influenced gold’s behaviour during the quarter. It provides macroeconomic context to the investment statistics published at the end of each quarter and highlights emerging themes relevant to gold’s future development. In this issue, we explore the influences that unconventional monetary policy has on financial markets. In particular, we discuss the effect of central bank policy actions on gold.

Q3 2012 in summary

• Gold (US$/oz) returned 11.1% in the third quarter as investors responded to further central bank measures aimed at stimulating the economy. Volatility decreased during the period, with gold prices experiencing little movement in the first half of the quarter; correlations to other assets, generally low, remained similar to those seen in Q2.
• Central banks announced a continuation of their unconventional monetary policy programmes in Q3.
• Central banks have numerous rationales for undertaking unconventional monetary policy, including lowering borrowing costs and supporting financial markets.
• Financial assets have responded to central bank policy announcements, but gold’s reaction has been the strongest.
• There is a consensus that these policies drive investment into gold purely due to inflation-risk impact. We believe that there is not one but four principal factors that provide further support to the investment case for gold:

    - Inflation risk
    - Medium-term tail-risk from imbalances
    - Currency debasement and uncertainty
    - Low real rates and emerging market real rate differentials

MORE...